Thursday, August 22, 2013

Borrrowed Exceptions to the Litigation Privilege

When a claim alleging a violation of the unlawful prong of the Unfair Competition Law arises from conduct that would generally be privileged under the Civil Code § 47(b) litigation privilege, the privilege does not apply when a “borrowed” statute is specific and inconsistent its application.

The Kern County DA sued a debt collector under the UCL to enjoin “unlawful”* conduct consisting of mailing allegedly misleading debt collection letters in violation of both the California and Federal Fair Debt Collections Practices Acts. The DA lacks standing to sue directly under either act, so it “borrowed” the statutory violations as a basis of its UCL unlawfulness claim. Defendant demurred on the ground that sending demand letters is litigation-related activity that is privileged under Civil Code § 47(b). The trial court agreed and granted the demurrer and the DA appealed.

The court of appeal noted that, although the defendant’s conduct fit squarely within conduct protected by litigation privilege, the privilege “is not without limit.” Various statutory-based exceptions have been read into the privilege based on the canon that these more specific prohibitions govern over the general privilege provided in § 47(b). And an earlier case—Komarova v. National Credit Acceptance, Inc., 175 Cal. App. 4th 324 (2009)—specifically recognized a statutory exception for cases brought under the California FDCPA.But, said the defendant, this case was not brought under the FDCPAs, it was brought under the UCL’s unlawful prong. Pointing to various cases, it argued that the UCL does not provide for a specific prohibition that carves out an exception to § 47(b). The court of appeal however, wasn’t buying the argument. It held that when the UCL borrows a standard from a statue that is more specific than the litigation privilege and the two are irreconcilable, an “unlawful” prong UCL claim is excepted. It reasoned that allowing the privilege to apply “would effectively render the protections afforded by those acts meaningless.”Reversed.

I’m not sure I’m in the car with panel on this one. Both FDCPAs have their own enforcement schemes, which include strong private rights of action. See Cal. Civil Code § 1788.30; 15 U.S.C. § 1692k. The state FDCPA—as Komarova held—is specific enough to create an exception to § 47(b) for such claims. And, although it isn’t mentioned in the opinion, applying § 47(b) to the federal FDCPA is a nonstarter, given the Supremacy Clause. See Kimes v. Stone, 84 F.3d 1121, 1127 (9th Cir. 1996) (§ 47(b) could not privilege conduct against a federal claim under 42 U.S.C. § 1983). It thus can hardly be true that applying the litigation privilege to an AG complaint that borrows the FDCPAs as unlawful-prong UCL violations renders the Acts’ substantive protections “meaningless.”Seems to me that, at the end of the day, this comes down to finding legislative intent in reconciling conflicting statutes. When the legislature enacts a statute that specifically provides for a cause of action against conduct that would generally be subject to the litigation privilege, it makes sense to read that enactment as creating an implied exception to § 47(b), a la Komarova. But should we read the enactment to create an implied exception for cause of action for a DA to bring a claim for an “unlawful” UCL violation when the statute itself does not provide for such a right of action? Not so sure. Don’t get me wrong. Not a fan of shady debt collectors. But this ball appears to be in the legislature’s court.*For readers unfamiliar with the UCL and curious about how it works, this case pretty much lays it out.